The Bureau of Labor Statistics’ monthly inflation report eliminated any hope of an immediate rate cut. The rate of inflation in December was 2.9%. This is the third consecutive month that it has increased. It is almost a whole percentage point higher than the Federal Reserve’s 2% target. All the increases in November, December and October came at a time when the Fed was launching a campaign to lower interest rates. Now, rates are almost certain to remain the same for longer than most people had hoped or anticipated.
Borrowers who are used to high interest rates, whether on mortgages or cards, will have to look for other ways to get by. In today’s high-rate environment, savers have a longer opportunity to increase their savings. Making the right decisions now is crucial. We’ll explain the steps that savers can take now that interest rates are on hold.
Find out how much interest you can earn with a CD here.
What should savers do with interest rates on hold
With interest rates frozen, here are three things that savers need to consider doing now.
Open a long-term CD
The best way to take advantage of today’s high rates is by opening a CD account. Savings can be made with long-term CDs that last 18 months or more. This allows them to earn rates today even after the market shifts. Savings can earn hundred or even thousand dollars if they put a portion of money in one of these CDs.
You can protect yourself from future rate volatility by carefully calculating any potential deposit. Be sure to calculate carefully any deposit you may make to ensure it will remain in the account up until maturation. Otherwise, you could be charged a penalty for early withdrawal.
High-yield Savings Accounts
High yield savings accounts offer rates that are competitive with CDs. They also don’t force savers to surrender their money the way CDs require. Savings accounts with average rates of 0.4% can be upgraded to high-yield savings accounts with rates as high as 4%.
The interest rates on high-yield saving accounts are subject to change, and will rise and fall with the market. This means that returns may be less predictable compared to CDs. This account is ideal for those who wish to earn high rates and still have access to their money.
Find out more about high-yielding savings accounts here.
High-Yield Checking Accounts
High-yielding checking accounts are less well known and could be worth consideration for savers. These accounts work like regular checking accounts, but offer savers the opportunity to earn interest on money they would have otherwise left in their account to cover future expenses or withdrawals. For a competitive rate, there may be minimum balances and direct deposit requirements. It may make sense for the right person to investigate, especially now that today’s rates are on hold.
Start a high-yielding checking account online.
The Bottom Line
Savings accounts, CDs with long terms and high yield savings accounts offer unique opportunities to capitalize on the current high interest rate environment. It’s important to act now while rates are high, especially with CDs that will lock in rates for many years. Keep your money in traditional savings accounts to a minimum. By not taking action now, you are essentially losing money.
